USDC stablecoin breaks dollar peg following Silicon Valley Bank collapse
Circle, the company behind the cryptocurrency, had $3.3 billion at the financial institution.
The abrupt collapse of Silicon Valley Bank has affected the value of the world’s fifth-largest cryptocurrency, increasing fears of a possible ripple effect among Web3 companies. On Saturday morning, USD Coin fell to a record low of $0.87 after Circle, the company that manages the stablecoin, disclosed that $3.3 billion of the approximately $10 billion cash reserves backing USDC was held by SVB.
As The Guardian notes, the drop is unprecedented. As a stablecoin, the value of USDC is supposed to remain stable thanks to its peg to the US dollar. According to data from CoinGecko, USDC’s previous all-time low was about $0.97 in 2018. More recently, the currency fell to $0.99 following the collapse of Three Arrows Capital. As of the writing of this article, USDC is valued at approximately $0.95 cents.
previously people were arguing that USDC had only lost its peg on the less deep exchanges (kraken, gemini)
down just about everywhere now. going to be a rough weekend, i think. pic.twitter.com/4BCW6Lael9
— Molly White @ SXSW (@molly0xFFF) March 11, 2023
Web3 is Going Just Great creator Molly White suggests the effect from a sustained USDC drop would be “enormous.” A handful of other stablecoins, including FRAX and DAI, use USDC as collateral. On Friday, Circle said it would “continue to operate normally” while it waits for more information on what will happen to SVB’s clients. "As of Thursday, we had initiated transfers of these funds to other banking partners. Though these transfers had not yet been settled as of close of business Friday, we remain confident in the FDIC’s management of the SVB situation and stand ready to receive these funds," Circle said on Saturday, adding $5.4 billion of its cash assets are held by BNY Mellon, "one of the largest and most stable financial institutions in the world."